Jabil (JBL) Short-Circuits On Earnings Miss, Guidance, Unit Sale

Andrew Klips |

Shares of Jabil Circuit (JBL) have doffed-off more than 20 percent in early Wednesday trading after the contract electronics maker delivered a mixed earnings report after Tuesday’s closing bell and said that it is selling its warranty business.

For the first quarter of fiscal 2014 ended November 30, Jabil recorded $4.6 billion in revenue, matching revenue from the year-prior quarter. Net income was $117.9 million, or 57 cents per share, compared to $105.8 million, or 51 cents per share, in the first quarter of fiscal 2013. Adjusted earnings, which exclude restructuring charges, stock-based compensation and other one-time items, were $105.4 million, or 51 cents per share, down from $127.8 million, or 61 cents per share, in last year’s quarter.

Wall Street was expecting adjusted earnings of 55 cents per share on revenue of $4.48 billion.

If the earnings miss was some dampness on the circuit board, the guidance was a downpour.

The company forecast that it will earn between 5 cents and 15 cents per share on revenue of $3.5 billion to $3.7 billion in the current quarter. This was far short of the 52 cents per share in profits on sales of $4.3 billion that analysts expected.

The decrease in earnings and revenue is tied in part to Jabil’s other Tuesday news that it is has struck a deal to sell its aftermarket services business to iQor Holdings, Inc. for $725 million.  Jabil said that it entered the warranty repair business in 1999 through a $30-million acquisition and grew those operations to about $1.1 billion in sales in fiscal 2013. However, the company’s AMS business is focused on depot repairs for consumer electronics, which is not aligned with current corporate strategies as a diversified manufacturer, so out it goes. 

Jabil manufactures and sells circuit boards that are used in computers, cars, phones and networking applications.  It’s largest customer in recent years has been embattled smartphone maker BlackBerry (BBRY) , but it is easing out of that relationship, in part because of the downward spiral of BlackBerry and the massive infrastructure and resources it takes to serve them. BlackBerry made up about 12 percent of Jabil sales in fiscal 2013. Apple (AAPL) is Jabil’s largest customer, comprising 19 percent of sales.

The iQor transaction is expected to be completed in the third quarter of fiscal 2014. Operating results from the business will be reclassified as discontinued operations, starting this quarter.

“This divesture should provide us the financial flexibility to potentially add more engineering intensive capabilities, which should allow us to expand and diversify our core manufacturing business,” said Mark T. Mondello, chief executive at Jabil, in a statement.

On the bright side, Jabil’s board authorized a $200 million in stock buy-backs over the next year.

Shares of JBL were relatively flat on the year through Tuesday’s close at $19.72, but have sunk to $15.60 this morning, their lowest level since September 2011.

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Companies

Symbol Name Price Change % Volume
AAPL Apple Inc. 111.03 1.08 0.98 29,999,208
JBL Jabil Circuit Inc. 21.31 -0.18 -0.84 2,876,421
BBRY BlackBerry Limited 7.63 0.06 0.79 1,974,454
ELPSF Enel Green Power SPA 1.90 0.00 0.00 0

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